Center for a New American Security

Some recent happenings in the Arctic:

• The Arctic Council will hold its biennial Ministerial Meeting on May 15. The Council is an intergovernmental body that attempts to address the challenges in the Arctic, including monitoring and assessment, environmental conservation, disaster response and resource management. On May 15, the eight member states that compose the Arctic Council – the United States, Canada, Russia, Denmark, Sweden, Norway, Iceland and Finland - will vote to decide the fate of the European Union and China within the Council. The EU and China are vying for promotion to permanent observer status from their current status as “ad hoc” observers. Permanent observer status would guarantee that the EU and China receive invitations to future meetings and increase their influence on the Council. The vote is not without controversy, and indigenous groups are pressuring Canada to block the EU unless they repeal their ban on seal products. The effect of this pressure could have significant implications - like all decisions made within the Arctic Council, the vote to grant permanent observer status must be unanimous.
• Governance in the Arctic has become increasingly relevant because, as Arctic sea ice continues its rapid decline, countries have begun to assess the Arctic’s potential as a future supply of fossil fuels and are seeking increased influence in the area. In particular, on May 3 Russian Prime Minister Dmitry Medvedev decreed that Russian energy company Gazprom has the right to access the estimated 63.5 trillion cubic feet of natural gas in the Arctic. The viability of oil and gas production in the Arctic, however, is unclear. In March, the Department of the Interior barred Shell from the Arctic after its report found that Shell failed in its Arctic drilling attempt because it was unprepared for the harsh climate. The Obama Administration is requiring Shell to present a plan to address its shortcomings before it can return. This incident demonstrates that less sea ice in the Arctic does not guarantee successful fossil fuel production. Before companies will be able to access the Arctic’s oil and gas resources, they will have to determine how they will overcome the region’s extreme and erratic weather. 

For the first time, the February 2013 Government Accountability Office High-Risk Series Report lists climate change as a high financial risk factor for the U.S. government. Specifically, it addresses the impacts of climate change on agricultural production and the U.S. government’s ability to respond to impending agricultural crises. Citing the United States Global Change Research Program, the report states, “the impacts and costliness of weather disasters- resulting from floods [and] drought- will increase in significance as what are considered ‘rare’ events become more common and intense due to climate change.” The potential costs to the federal government are substantial, particularly with regards to its role as “insurer of property and crops vulnerable to climate impacts.”

GAO’s prescience has proven evident in recent weeks. The Midwest (to include Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, Ohio, North and South Dakota, and Wisconsin) has experienced debilitating extremes of drought and floods. Every county in Kansas and 89 of the 93 counties in Nebraska have been declared drought emergencies well before harvest season. Simultaneously, 48 of the 102 counties in Illinois experienced flooding and devastation of crop land.

The implications of the drought and flood cycle are far-reaching for U.S. markets and policy. According to the USDA and the EPA, the affected region accounts for 85% of U.S. corn production, 81% of U.S. soybean production, and approximately 67% of U.S. wheat production. Corn exports comprise the largest net contribution to the U.S. agricultural trade balance of all agricultural commodities- highlighting the importance of developing effective crop crisis response.

Drought and flood will continue to persist as long-term problems. Yet the current fiscally constrained environment further limits the government’s ability to respond in an ad-hoc fashion to crop disasters resulting from climate change. GAO recommends a new look at the way federal crop insurance functions, taking into account permanent changes in climate patterns that have emerged since the inception of federal crop and flood insurance programs. It also recommends concerted efforts at data collection and analysis to ascertain the impacts of long-term climate change exposure- both on agriculture and the structure of insurance. Most importantly, the GAO recommends a stronger relationship between the Secretary of Agriculture and the Secretary of Homeland Security regarding the effects of climate change on agricultural production- establishing U.S. food security as a matter of national security. 

Photo: Drought designations as of May 2, 2013. Courtesy USDA Farm Service Agency. 

On April 30, the United States Geological Survey (USGS) released a new assessment for oil and gas reserves in North Dakota, South Dakota and Montana. The assessment includes new estimates for the Three Forks Formation and updated estimates for the Bakken Formation.

By combining the estimates for Three Forks and Bakken, the USGS found that the region has far greater reserves of oil and natural gas than previously thought. The USGS estimates that the two formations have a total of approximately 7.4 billion barrels of undiscovered, technically recoverable oil, which is twice the amount that was reported in the 2008 assessment.

The recent assessment also found that the Three Forks and Bakken formations have a combined 6.7 trillion cubic feet of natural gas and 0.53 billion barrels of natural gas liquids, representing a threefold increase from 2008 estimates.

The use of hydraulic fracturing and horizontal drilling technologies to extract shale gas and light tight oil has unlocked the productive potential of the Bakken and Three Forks formations. As a result, the USGS has designated the shale gas and light tight oil as “technically recoverable,” meaning they are “producible using currently available technology and industry practices.” Hydraulic fracturing and horizontal drilling have brought about what some are calling an American energy revolution by allowing companies to access unconventional resources, which were previously thought of as unrecoverable.

The true extent of unconventional oil and natural gas reserves in the United States is uncertain, however, because assessments of technically recoverable reserves are far more predictive than they are factual. For example, in January 2012 the U.S. Energy Information Administration (EIA) drastically reduced their estimates of technically recoverable shale gas in the United States. In the 2012 Annual Energy Outlook, the EIA cut its estimates to 482 trillion cubic feet, far lower than the 2011 estimate of 827 trillion cubic feet. This reduction can largely be attributed to a reassessment of the Marcellus shale formation, based on additional drilling and production data. The revised estimate of 141 trillion cubic feet for the Marcellus formation was a 66 percent decline from 2011 numbers.

While tight oil production in the Bakken and Three Forks formations has the potential to upend the global energy order and dramatically reduce U.S. oil imports, the extent of the resource and ultimate production levels in the United States, and subsequent effect on the geopolitics of energy, are by no means a foregone conclusion.  

Photo: A drill in the Bakken oil field of North Dakota. Courtesy Stephanie Gaswirth and the USGS. 

Last week, Tom Donilon, National Security Advisor to the President, spoke at the launch of Columbia University’s Center on Global Energy Policy. In his speech, Donilon discussed the interplay of increased domestic production of oil and gas with U.S. national security and foreign policy. Donilon highlighted 5 key themes in this interrelationship:

1) A stronger domestic economy. Donilon tied the economic benefits of cheap and abundant natural gas, including job creation in the form of a manufacturing renaissance in energy-intensive and gas-dependent sectors, to American influence abroad: “Our strength at home is critical to our strength in the world, and our energy boom has proven to be an important driver for our economic recovery—boosting jobs, economic activity, and government revenues.” 

2) Increased flexibility and leverage in foreign policy. In particular, increased domestic production of oil helped to maintain the stability of global oil prices by offsetting the reduction of 1 million barrels of Iranian crude from the international market due to increased sanctions on Iran. Greater flexibility in global supply allowed the United States and the EU to tighten sanctions and further discourage Iran from pursuing nuclear weapons. And they were effective – Iran’s oil exports fell by 39 percent in 2012, which will not go unnoticed by a government that is dependent on oil for over half its revenue.

3) A more globally robust natural gas market. The benefits of a more robust global gas market  include a diversity of supply, delinking of gas prices from oil indexed contracts, less leverage of “traditional dominant natural gas suppliers” (i.e. Russia over Europe), and natural gas “bridging” to a less carbon-intensive economy. Ultimately, DOE’s upcoming decisions whether or not to approve the construction of LNG export terminals will determine the extent of a globally integrated gas market.

4) Maintained commitment to the Middle East. Increased domestic production is not an excuse for global retrenchment. Reduced dependence on Middle Eastern oil does not negate other U.S. security interests in the region. In Donilon’s words:

We have a set of enduring national security interests in the Middle East, including our unshakeable commitment to Israel’s security; our global nonproliferation objectives, including our commitment to prevent Iran from acquiring a nuclear weapon; our ongoing national interest in fighting terrorism that threatens our personnel, interests and our homeland; our strong national interest in pursuit of Middle East peace; our historic stabilizing role in protecting regional allies and  partners and deterring aggression; and our interest in ensuring the democratic transitions in Yemen, North Africa and ultimately in Syria succeed.

It is important to note that Donilon does not mention “energy independence” in his speech. Despite politicians’ consistent rhetoric to the contrary, “energy independence” is a misnomer. Oil is a global commodity, and international events that hinder supply will affect the price of oil in the United States. As a result, continued U.S. engagement in the world is necessary to ensuring greater stability in energy markets.

5) Climate change as a national security challenge. Donilon views the increased frequency and severity of natural disasters domestically and internationally as a threat to national security. The potential instability wrought by climatic changes can be a threat multiplier and can impact military installations around the world. For Donilon, “this underscores the need – for the sake of our national security -- to reduce the greenhouse gas emissions that drive climate change and to ensure that we are as prepared as possible for the impacts of climate change.”

Security of the nation’s electrical system from cyber attacks has received much attention as of late, but a recent event reminds us of the vulnerabilities in physical security. Last weekend, a security officer at Watts Bar nuclear power plant in eastern Tennessee exchanged gunfire with a man attempting to break into the facility.  When confronted, the man opened fire on the officer, and a gunfight ensued. The officer was not harmed, and the gunman fled the area after the exchange.

The FBI, Nuclear Regulatory Commission and local authorities are investigating the incident. The gunman remains at large.

While little information is known about the suspect, this incident demonstrates the physical security challenges posed by our electricity system. Nuclear facilities, of course, are particularly high profile targets that require a level of physical security far greater than that of other power plants. Nuclear facilities are required to have extensive security plans, and the response at the Watts Bar plant proved effective. But this event should serve as a reminder of the physical vulnerability of the U.S. electricity system writ large. The threat of a concentrated, coordinated attack is troubling and should not be ignored.

Reliance on centralized power plants and an outdated grid makes the electricity system vulnerable to terrorist attacks. A coordinated physical attack on several power plants and/or the grid itself could cause extensive and sustained power outages, which would have dire effects. According to Scott Pugh at the Department of Homeland Security, an attacker who understood vulnerabilities in the grid could use a “hunting rifle from a couple hundred yards away” to take out six key substations and “black out most of the U.S. east of the Mississippi.” And a more sophisticated attack, such as an electromagnetic pulse, could shut down large parts of U.S. electricity infrastructure for months. Food distribution, telecommunications, banking, heating/cooling systems, medical and safety infrastructure and security institutions (such as DoD installations) are all dependent on the grid and would struggle to function. Such an event would cause tremendous economic disruption and widespread chaos. Imagine the impacts of Hurricane Sandy, which caused over 8 million homes to lose power and necessitated 57,000 additional utility workers to restore it, but magnified many times over due to the targeted nature of an attack.

Photo: Image of Earth taken during the Apollo 11 mission, which brought the first man to the moon in July 1969. Courtesy NASA.

On April 5, the U.S. Department of Defense announced that the largest renewable energy project in U.S. military history is expected to begin soon at Fort Bliss, Texas.  Once operational, the project will contribute to Fort Bliss’ strategic objective of achieving energy self-sufficiency and the Army’s broader goal of using 25 percent renewable energy by 2015.

The Fort Bliss project has received the green light from the U.S. Army Corps of Engineers. El Paso Electric will construct the 20 megawatt solar farm, which will power all of the division headquarters and the eastern sector of the base.

Saturday marked John Kerry’s inaugural visit to China as acting Secretary of State. While North Korea’s most recent episode of belligerence took center stage and dominated the news, the United States and China also released a joint statement promising cooperation on climate change.

The joint statement called for “forceful” action on climate change through “large-scale” cooperation. According to the statement,

Both sides also noted the significant and mutual benefits of intensified action and cooperation on climate change, including enhanced energy security, a cleaner environment, and more abundant natural resources. They also reaffirmed that working together both in the multilateral negotiation and to advance concrete action on climate change can serve as a pillar of the bilateral relationship, build mutual trust and respect, and pave the way for a stronger overall collaboration. Both sides noted a common interest in developing and deploying new environmental and clean energy technologies that promote economic prosperity and job creation while reducing greenhouse gas emissions.

While this is not the first example of engagement between the United States and China on climate change, it is notably different than previous arrangements. The agreement increases dialogue by forming a Climate Change Working Group to determine specific ways in which the two countries can advance climate cooperation through research, conservation and technology. The Working Group will deliver a report at July’s Strategic and Economic Dialogue (S&ED), which is an annual meeting between American and Chinese cabinet level officials to discuss broad strategic, economic and security opportunities and challenges.

President Obama’s nominee to lead the Department of Energy, Ernest Moniz, received bipartisan support on the Hill on Tuesday and appears likely to sail through the confirmation process.

Moniz, a physicist at MIT and former undersecretary of energy, has made his support for natural gas production in the United States clear, and he used Tuesday’s hearings as an opportunity to double down on this position. According to the Washington Post, Moniz said he would use the natural gas boom as a means of reducing carbon emissions, increasing domestic energy production and expanding manufacturing job growth.

While Moniz appeared unequivocal in his views on natural gas, he was less clear on his position concerning liquefied natural gas (LNG) exportation. Moniz’s position on the issue is paramount to the future on LNG exportation, because the Department of Energy is responsible for approving companies’ applications to construct LNG export terminals.

The ballots have been cast, the votes are in and the pundits are exhausted. While the world consumes the election results, we’ll take a break from our normal post today to highlight some natural security news items that may have been missed in the wake of the presidential election.

Bloomberg News reported this morning that the Department of Defense (DOD) is taking a more active role in assessing its supply chain vulnerability for heavy rare earth elements, those rare earths that are less abundant than others in the 17-element rare earths group. According to the report, DOD may be setting a demand signal to help foster a non-Chinese supply of rare earths, particularly from mines in North America. China, today, produces approximately 95 percent of rare earth minerals, but only has 50 percent of known global reserves.

According to Reuters, Laos has started construction on a $3.5 billion hydroelectric dam on the Mekong River that could have cascading effects on downstream countries like Vietnam that rely on the river for fish and fresh water. Laos hopes to become the hydroelectric battery of Southeast Asia, exporting hydropower to countries like Thailand.

CNBC reports that Iran has increased its naval activity in the Gulf of Persia near the Strait of Hormuz in order to strengthen its authority over disputed islands in the gulf that both Iran and the UAE have made claims to.

Geothermal energy systems may present climate mitigate and adaptation opportunities to building developers, according to The New York Times. Indeed, geothermal energy may be an increasingly attractive option for developers in areas prone to storms that can devastate above-ground infrastructure. These systems offer a way to harness the earth’s energy to heat and cool buildings relying on less-vulnerable underground infrastructure while reducing the building’s greenhouse gas footprint.